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EGBS: OAT/Bund Spread A Little Tighter As Bayrou Survives No-confidence Vote

EGBS
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The 10-year OAT/Bund spread is a little tighter this morning, after PM Bayrou's government survived a no-confidence vote yesterday. The result was widely expected, with the far-right RN and centre-left PS signalling in advance that they would not support the far-left LFI’s censure motion.

  • That leaves the spread at 78bps, its tightest since mid-December. However, prospects for meaningful tightening below ~75bps still appear limited by medium-term political and fiscal risks.
  • Consultations on pension reform (one of Bayrou’s concessions to the left) begin today.
  • Budget Minister Montchalin said earlier this week that a budget will aim to be presented by the end of January. The Government targets a 5.4% deficit in 2025, entailing around E53bln of savings.
  • APA reports that Austria will not face an EU Excessive Deficit Procedure, in line with our policy team’s reporting earlier this week. The 10-year RAGB/Bund spread has tightened marginally since the headlines crossed, now at ~36.5bps.
  • Broader peripheral spreads to Bunds are also biased tighter, with European equity futures up 0.55%. 
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The 10-year OAT/Bund spread is a little tighter this morning, after PM Bayrou's government survived a no-confidence vote yesterday. The result was widely expected, with the far-right RN and centre-left PS signalling in advance that they would not support the far-left LFI’s censure motion.

  • That leaves the spread at 78bps, its tightest since mid-December. However, prospects for meaningful tightening below ~75bps still appear limited by medium-term political and fiscal risks.
  • Consultations on pension reform (one of Bayrou’s concessions to the left) begin today.
  • Budget Minister Montchalin said earlier this week that a budget will aim to be presented by the end of January. The Government targets a 5.4% deficit in 2025, entailing around E53bln of savings.
  • APA reports that Austria will not face an EU Excessive Deficit Procedure, in line with our policy team’s reporting earlier this week. The 10-year RAGB/Bund spread has tightened marginally since the headlines crossed, now at ~36.5bps.
  • Broader peripheral spreads to Bunds are also biased tighter, with European equity futures up 0.55%.